April 25, 2007

This paycheck will self-destruct in 30 seconds

Quico says: Never is the Chávez regime on shakier footing than when it's talking about money. Never is its thinking more muddled, simplistic, contradictory and counterproductive.

In the last few weeks, the regime has proposed not one, not two, but three new currencies. These proposals, of varying degrees of lunacy and incompatibility with one another, illustrate better than any other the staggering collapse of economic common sense among the people who rule us.

The "bolivar fuerte" is also, one should note, in direct contradiction with the second proposal, a call for a common, Latin American currency modeled on the Euro. This one, I admit, might actually do the country some good. It would remove control over monetary policy from Chávez's bumbling cronies and pawn it off to some hemispheric moneycrat, presumably in Brazil. It has, alas, no chance of being implemented, since it could only succeed if states surrendered sovereignty over fiscal policy and financial, product and labor markets on a scale that nobody in Latin America - and least of all Chávez - would seriously consider.

But it's the third proposal - Chávez's pet call for "local barter vouchers" to extract part of the economy from the cold grip of capitalism - that best illustrates the dizzying extent of Chávez's pecuniary delirium:

I can't think of a clip that better captures the tragedy that Chávez's sophomoric utopianism is preconfiguring. The plan here is to "pay" people with barter vouchers that can be used only to buy things from other local producers and within a specified period of time.

These vouchers, the video announces proudly, "rust." Their value declines over time, so you're better off spending them right away. Of course, we already have a word for that: inflation. Most people think of it as a bad thing. Chávez, though, trumpets it as the next Big Thing in development economics. You'd think it's a joke, a bit of mischievous opposition agit prop, a reductio ad absurdum send-up...but no, they're actually doing it.

The goal here is to introduce a form of money that can't be accumulated so it can't be saved, and it can't be invested. It has a nasty, cold, capitalist overtone, that word "investment," so it's not surprising the government would dream up plans to prevent poor people from doing it. But when you unpack it, what does it really mean?

All it means is choosing to consume a little bit less today so you can consume a little bit more in the future. When you invest, you reshuffle your consumption preferences over time. You trade less now for more later.

Now, can you think of a clearer definition of poverty alleviation than being able to consume more in the future than you can consume today? In some fundamental, definitional sense, poverty can only be overcome through investment.

A farmer setting aside part of his harvest for seed. A buhonero foregoing a beer today so he can save to fix up his house. A parent walking to work instead of taking the bus so he can afford schoolbooks for his kids. That's the popular face of investment in Venezuela today.

Such behavior, Chávez informs us, is counter-revolutionary, infected with the germ of selfishness and individualism that lies at the root of capitalism. What you earn today you have to consume today, or within the few months before your barter voucher expires. Accumulation is banned, working for a future better than today is treason.